Select Committee on Economic Affairs Fourth Report


FOURTH REPORT


5 NOVEMBER 2003

By the Select Committee on Economic Affairs

ORDERED TO REPORT

ASPECTS OF THE ECONOMICS OF AN AGEING POPULATION

SUMMARY

  The population of the United Kingdom is ageing. In 2001, for the first time in the United Kingdom, there were more people aged over 60 than under 16. By 2051, an estimated one in four people will be aged over 65. Much debate on the ageing population has focused on the challenges it presents. We believe that, just as society has adjusted to accommodate the demographic changes that have been experienced so far, so too will it adjust to accommodate the challenges of the future.

  Inevitably, given our remit[1], our inquiry focused on economic aspects, although we recognise and appreciate social and cultural factors such as attitudes towards older people and their needs and preferences.

  Having explained the scope and focus of our inquiry in chapter 1, in chapters 2 and 3 we briefly set out the demographic and macroeconomic context. We identify the causes of population ageing, and note that its economic impact is likely to be greater in other developed economies than in the United Kingdom.

  Chapters 4 to 6 cover employment, in relation to participation (chapter 4); productivity (chapter 5); and age discrimination (chapter 6). We emphasise the importance of increasing the labour force participation of older workers. We note that average age-specific participation rates mask much lower rates in some regions and among some ethnic minorities and women. We also discuss the relative importance of supply-side and demand-side factors in the economic activity of older people.

  Supply-side and demand-side factors are further assessed in chapters 5 and 6, which discuss how older people's capacity for work, and employer perceptions of that capacity, affect employment opportunities for older workers. We recommend job and workplace redesign and the promotion of skill acquisition in order to enhance older people's work capacity, and we note the dearth of reliable evidence on the relationship between age and individual productivity. We advocate comprehensive legislative and cultural initiatives to ensure the elimination of age discrimination in both the public and private sectors.

  Chapter 7 considers some of the consumption issues that arise in relation to older people. We draw attention to cases of market failure in the design, provision and marketing of goods and services, and to restrictions on access to providers of goods and services.

  Chapters 8, 9 and 10 deal with retirement income. Chapter 8 draws attention to the changing social structure and the particular problems faced by women, who constitute the majority of pensioners, and ethnic minorities in making adequate pension provision. We conclude that the contributory system should be replaced by a pension paid on the basis of citizenship entitlement.

  Chapter 9 assesses the opportunities available for making private provision for retirement, and the context in which such provision is made. We note the factors involved in decisions relating to making private provision, and conclude that, despite inadequate voluntary private pension saving, further compulsion in addition to that which is already in place under the national insurance system is not inevitable.

  Chapter 10 deals with the excessive complexity of the public pension system and the implications of that complexity. We note the effects of means testing, which include high marginal tax rates and reduced incentives to save. Finally we assess whether, and in what respects, the United Kingdom faces a pensions crisis, and we recommend the establishment of an independent authority to provide more stability and certainty in the design and implementation of appropriate pensions policies.


1   "to consider economic affairs" Back


 
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